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Medical Coding News Archives

Revenue Codes Should Reflect the Cost Center, Not the Place of Service

August 23, 2012:

Regina Magnani, RHIT, Clinical/Technical Editor

Every year, providers complain about payments that do not reflect actual costs they incur. Every year, the Centers for Medicare and Medicaid Services (CMS) reminds providers to report the revenue code that corresponds to the cost center used to report the related costs on the cost report. Hospitals must remember this directive as there are many people, including some consultants, who continue to state that the revenue code should represent the place where the service was rendered.

Revenue codes were originally summary billing codes created to provide a standardized method of identifying facility charges. Beginning in the late 1970s, three-digit revenue codes described the types of services provided. For example, revenue code 250 represented the drugs and biologicals given to the patient during the stay or service that was being billed. As medical care and payers became more sophisticated, the list of revenue codes grew and became more detailed. Revenue codes expanded to four digits.

When CMS first implemented the outpatient prospective payment system (OPPS), the agency linked some revenue codes with CPT and HCPCS Level II codes, but for surgical and dental procedures, injections, cardiovascular services, photodynamic therapy, and several other services, hospitals were advised to report the revenue center that corresponded to the place where the service was rendered—this out-of-date instruction causes the current confusion.

As OPPS evolved, CMS changed the revenue code directive. In 2008, it deleted the table linking revenue codes with CPT and HCPCS Level II codes. The agency said that when explicit instructions have not been given, the revenue code must correspond to the cost center used to report the related costs on the cost report. For example, if the costs related to a fluoroscopic-guided needle biopsy are reported under the radiology-diagnostic cost center, the CPT code for the needle biopsy should be reported under revenue code 0320. If the costs related to this needle biopsy are reported under the cost center for the operating room rather than under the radiology-diagnostic cost center, the revenue code reported with the CPT code for the needle biopsy should be 0360 or 0361.

OPPS (and IPPS) payment rate increases are primarily based upon charges reduced to cost by using a cost-to-charge ratio developed from historical claims data and cost reports. CMS publishes a crosswalk that indicates if and how charges on a claim are mapped to a cost center for the purpose of converting charges to cost. Every active revenue code is listed on the spreadsheet. See the crosswalk here.